A proposed agreement between the Australian Record Industry Association, the Australian Mechanical Copyright Owners Society and the Australian Music Retailers Association is likely to breach the Trade Practices Act, ACCC Chairman, Professor Allan Fels, warned today.
He was responding to question from Senator Abetz, Chairman of the Legislation Committee of the Senate Committee on Constitutional and Legal Affairs, during the committee's public hearing on CD parallel importing.
The agreement would permit AMRA members to directly import CDs in limited circumstances and appears to be designed to ward off a complete lifting of ARIA's import monopoly by legislation, Professor Fels said.
But, according to the ACCC and to an opinion obtained by a leading Queen's Counsel, Mr David Shavin, the agreement, unless subject to the possible application of the Copyright Act:
- appears to eliminate any competition in relation to the supply of licenses for the importation of recordings [which would give rise to serious concerns under section 45(2) of the Act which prohibits anticompetitive agreements];
- to the extent that the agreement involves ARIA and AMCOS and their members suppling import licenses only at a price of $1, it clearly constitutes an agreement to fix a price, it is a prima facie contravention of section 45(2) of the Act;
- to the extent that, as it appears, the agreement to grant import licenses is limited to AMRA members, it could constitute an unlawful exclusionary provision under section 4D of the Act;
- contains a number of detailed provisions likely to breach section 45(2) of the Act; and
- gives rise to serious concerns under section 46 which prohibits the misuse of market power.
Broadly the agreement allows AMRA members to directly import CDs where ARIA members cannot supply them, subject to the numerous limitations. These include that:
- the retailers must place an order on the ARIA member (a relevant wholesaler). If the wholesaler cannot supply within two days or indicate that supply is unavailable within 14 days, the retailer can, subject to limitations, import the CDs; the retailer must affix an import stamp purchased from ARIA for $1. There must be a purchase order of 50 import stamps;
- the retailer seemingly must be an AMRA member;
- the right to import is limited to that part of each order that the wholesaler cannot supply;
- the retailer can only import CDs made in seven countries. More than 100 countries are excluded;
- the retailer must not import CDs on sale at less than list price in the exporting country;
- no imports of CDs where the same or a similar CD is on sale in Australia with different packaging or other such differences;
- no imports of deletions from overseas catalogues;
- no imports of CDs on sale overseas at or below cost;
- no imports of custom-pressed CDs;
- no imports of CDs with artists with two copyright owners;
- no imports of CDs previously on sale in Australia but deleted less than six months ago; and
- importantly, wholesaling of imported CDs is not allowed.
The agreement shows that ARIA is not really opposed to parallel imports, Professor Fels said. It simply wants the ARIA club to control them, and to ensure their effects on competition are minimal.
The proposed agreement appears to be a sham. It will not make it easier for retailers to import those CDs not available in Australia but freely and readily available overseas.
The agreement has serious anticompetitive effects, for example in prohibiting purchases of CDs at prices below list prices overseas; in applying a uniform license fee of $1; and in limiting its application to AMRA members.
The agreement appears to indicate an approach by ARIA to resist the opening up of the market to competition.
Instead ARIA, which is dominated by multinational record companies, clearly wants to retain tight control of the market.
The arrangements are highly bureaucratic, regulatory, and reminiscent of rationing in World War II and in former socialist countries.
Mr David Shavin QC believes the intellectual copyright exemptions in the Act do not apply to all the provisions of the agreement.
A copy of this opinion is attached (in Canberra) and available from the ACCC elsewhere.